For the first time since CreditCards.com began tracking interest rates in 2007, APRs on new credit card offers remained unchanged for a third week in a row, according to the CreditCards.com Weekly Credit Card Rate Report.
|CreditCards.com’s Weekly Credit Card Rate Report|
|Avg. APR||Last week||6 months ago|
|Methodology: The national average credit card APR is comprised of about 100 of the most popular credit cards in the country, including cards from dozens of leading U.S. issuers and representing every card category listed above. (Introductory, or teaser, rates are not included in the calculation.)|
The national average APR on new credit card offers stayed at 14.65 percent. Several factors may have contributed to the unusual stillness, experts say. But primarily, card issuers may have finally begun to understand how to achieve and maintain profits in the wake of both the Credit CARD Act of 2009 and the Great Recession.
“It has created more certainty in the credit card business and limited the need for experimentation,” said Diane Swonk, chief economist at Mesirow Financial.
That lack of experimentation is evident in CreditCards.com data. No issuers made standard purchase APR changes this week, making it the seventh time this year that the average has stayed static. Only once in 2011 has the national average even moved more than one-hundredth of a point in a week. That came because subprime credit card issuer First Premier stopped offering a card with a 59.9 percent APR card and replaced it with a card with a 49.9 percent APR, forcing the national average down nearly one-tenth of a point that week in early March.
Card business stabilizing?
The one-two punch of the recession and the Credit CARD Act delivered powerful body blows to the industry, forcing the industry to reassess the way it conducts business. Now that the act’s major mandates have had more than a year to be digested, however, experts say issuers are finding their footing, profits are returning and offers are becoming more consistent — and stationary.
Fewer credit card defaults have also yielded a greater sense of stability among banks, Swonk says.
“For now, card issuers have seen defaults abate and are taking advantage of a moment of clarity,” Swonk said, “even if it is not the world that they would like to envision.”
Cristian deRitis, director at Moody’s Analytics, agrees. Credit card issuers were quick to respond to the recession by slashing credit lines and cutting back on new card offers, he said. “The CARD Act also pushed them to provide credit only to the most creditworthy borrowers while they determined the full implications of the law and changed their business models to conform to it,” deRitis said. “With the gradual improvement of the economy over the last two years, issuers have seen the volume of charge-offs start to decline and are now looking to grow market share.”
Still, not all is clear when it comes to regulation. Mounting concerns over new regulations resulting from Wall Street reform — notably one that would cap bank fees on debit cards — may also be slowing changes in credit card rates. Swonk said industry leaders’ attention may be distracted while they scramble to field implications of these new initiatives. “Uncertainty about how the rules will actually play out is no doubt playing a large role,” Swonk said. Much has yet to be decided about regulations and how they are actually enforced by regulators, she said.